Starbucks to Slahs Grocery Coffee Prices

Starbucks Corp (NASDAQ:SBUX) on Friday said it would cut grocery list prices on its namesake and Seattle's Best packaged coffee by 10 percent or more on May 10, as coffee costs fall and it fights for more sales through supermarkets and other retailers.

Competition in the coffee grocery aisle is intense and Starbucks' move follows price reductions by rival packaged coffee sellers earlier this year.

Starting next month, the suggested retail price on 12-ounce packages of Starbucks coffee will fall to $8.99 from $9.99 and Seattle's Best will go to $6.99 from $7.99.

Starbucks' price cuts apply only to packaged coffee sales through other retailers. They do not apply to packaged coffee and prepared drinks sold in the company's own shops, spokeswoman Lisa Passe said.

In February, top U.S. packaged coffee maker J.M. Smucker Co reduced suggested retail prices on poplar brands such as Folgers and Dunkin' Donuts by an average of 6%.

Kraft Foods Group Inc quickly followed with a similar price cut for its Maxwell House and Yuban brands. Arabica coffee futures hit the lowest level in nearly three years in mid-March at $1.3405 per lb, down more than 55% from the 34-year high above $3 per lb, reached in May 2011.

The price drop has been so dramatic that some makers of instant coffee, which is often made from the typically cheaper and more bitter-tasting robusta bean, have begun to buy arabica beans for their blends.

The benchmark July arabica coffee futures contract trading on ICE Futures U.S. closed up 0.80 cent, or 0.6%, at $1.3915 per lb on Thursday.